Labor Department Moves to Open 401(k) Plans to Wall Street Firms

The Labor Department published a proposed rule aimed at making it easier to include nontraditional investments like private equity and cryptocurrency in workers' 401(k)s, and the stakes are enormous: the proposal, if finalized, could open up a retirement investment market worth nearly $14 trillion to more Wall Street firms by reshaping the legal landscape that governs how employers manage their workers' savings.

The rule, formally titled "Fiduciary Duties in Selecting Designated Investment Alternatives," was published March 30, 2026. It followed an executive order President Trump signed in August 2025 directing the Labor Department to expand retirement plan access to alternative assets. The proposal came in direct response to that executive order and reverses earlier Biden-era guidance that discouraged such investments due to risk concerns.

The practical change is structural. For years, the threat of ERISA litigation has kept most 401(k) menus confined to stocks, bonds, and mutual funds. The rule creates a so-called safe harbor that can help shield plan sponsors from litigation by identifying six factors for a plan fiduciary to "objectively, thoroughly, and analytically consider" when selecting alternative investments: performance, fees, liquidity, valuation, performance benchmarks, and complexity. The proposed rule gives plan fiduciaries "maximum discretion and flexibility in selecting any particular investment as a designated investment alternative," according to the DOL.

Labor Secretary Lori Chavez-DeRemer said in a statement, "This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today." Deputy Secretary Keith Sonderling framed it as a neutrality measure: "The department's days of picking winners and losers are over. Our rule clearly spells out that managers must evaluate any and all potential product offerings by following a prudent process. This proposal is decidedly neutral and refrains from saying that any asset class is any better or worse than other investment types, as the law requires."

That framing has not quieted critics. Senator Elizabeth Warren warned that the rule could expose workers to losses while benefiting large financial firms, saying: "As cracks emerge in the private credit market, private equity returns fall to 16-year lows, and crypto keeps tumbling, President Trump has decided now is the time to stick all of these risky assets into Americans' 401(k)s." Warren added: "Americans facing an uncertain future in Trump's economy will now have more reasons to question the security of their retirement savings, all so that Trump's Wall Street buddies have another pile of cash to play with."

For workers trying to understand what this means for their retirement accounts, the six safe harbor factors are the key document to watch. The fee factor is particularly consequential: a fiduciary must consider fees and expenses relative to "similar alternatives" and conclude that fees are appropriate considering the risk-adjusted return plus any other "value" of the investment. Private equity and private credit funds typically carry management fees of 1.5 to 2 percent annually, plus carried interest of around 20 percent on gains, structures far more expensive than the index funds that dominate most 401(k) menus today. Even a 1 percent increase in annual fees can reduce a retirement balance by roughly 17 percent over 20 years, according to the Department of Labor's own historical fee guidance.

The liquidity factor demands equal scrutiny. The proposed rule would not completely bar potential claims by plan participants arising from risky investment decisions or excessive fees associated with alternative assets. Fiduciaries would also continue to be "prohibited from selecting a designated investment alternative that is otherwise illegal." But unlike a mutual fund, private equity and real estate investments can lock up capital for years, meaning workers approaching retirement may not be able to exit positions when they need to.

Experts urge workers not to expect immediate changes. Jaret Seiberg, financial services and housing policy analyst at TD Cowen, wrote in a research note: "We remain skeptical that this will encourage fiduciaries to include alternatives in 401K plans until the courts have concurred that this language protects advisors from litigation. That means it could be several years before we see the real impact from this proposal." The Supreme Court's removal of Chevron deference means the rule would be afforded a lower level of judicial deference, and the DOL acknowledged that the proposed rule would provide only "persuasive authority regarding what constitutes a prudent process."

Knowing this, workers should take specific steps now rather than wait. Ask your HR department or plan administrator whether the plan menu is being reviewed for alternative asset options, and request a copy of the plan's Investment Policy Statement, which describes how investment decisions are made. When reviewing any new fund added to a plan menu, check the fee disclosure notice required under ERISA section 404a-5, which plan administrators must provide annually. Examine the expense ratio, any performance-based fees, redemption restrictions, and how the fund's value is calculated. The valuation question matters because private assets, unlike publicly traded stocks, are not priced daily, creating windows where a worker's stated balance may not reflect actual market value.

The proposed rule is subject to a 60-day public comment period, with comments due by June 1, 2026. The final rule could change in response to comments, and a finalized version could arrive by the end of 2026. Until then, no plan sponsor is required to add alternative investments, and most are unlikely to move quickly given the ongoing litigation uncertainty. The comment period itself represents a concrete opportunity: workers, union members, and plan participants can submit formal comments to the Employee Benefits Security Administration on record before the rule is locked in.